1996 - National Treasury

2-10
these functions, the share of remuneration of employees in
total expenditure typically exceeds 70 per cent.
Other factors also contributed to the growth of remuneration
of employees. These include marked increases in
employment and average remuneration in several subnational
authorities (including former own affairs
administrations, TBVC states and self-governing territories),
the phasing-out of racially discriminatory pay practices and
improvements to the relative wage levels of lower paid
workers.
Interest payments have also grown relative to GDP during
the period under review, partly as a result of higher interest
rates. In addition, slower revenue growth than expenditure
increases during the 1989 to 1993 recession impacted on
the annual public sector borrowing requirement, leading to
an escalation of the public debt and associated increased
interest costs.
The trend in the GDP share of subsidies reflects spending
on export promotion, commuter transport and regional
industrial development, while drought relief payments
dominate the 1992/93 figure. Elimination of racial disparities
in the levels of old age pensions and other social grants
increased relative spending on current transfers to households.
2.4 EXPENDITURE PLANNING
2.4.1 The budgetary process
The reform of the budgetary process introduced by the
Department of State Expenditure and given effect during the
preparation of the 1995/96 Budget has contributed to more
effective fiscal planning and overall expenditure management.
The planning process, which begins about eighteen
months before the presentation of the budget to Parliament,
comprises the following:
• the identification of all activities rendered by a
spending agency;
• compilation of budgets from zero while at the same
time reassessing the efficiency, effectiveness and
economy of all activities to ensure that costs are
limited to the minimum;
defining the goals of the government in so far as
these pertain to the spending agency or the function
for which a spending agency is responsible;
• defining and examining the rationale for each
activity;
• discarding inherited activities that do not promote
agreed goals and establishing new activities which
do reflect these goals;
• prioritising all activities of spending agencies against
an agreed set of criteria;
• evaluation of the planning and reprioritisation
exercises of the spending agencies by the Department
of State Expenditure and task teams under its
auspices;
• formulation of a multi-year fiscal plan in which
allocations will be made to functions based on their
relative needs and priorities; and
• determination of an expenditure level per year within
the framework of a multi-year fiscal plan.
Participation of relevant role-players takes place throughout
the process and Cabinet, in the final instance, evaluates and
approves spending allocations prior to submission of
expenditure estimates to Parliament.
As part of an ongoing review of the budgetary process and
to contribute to the drafting of a White Paper on Budget
Reform, the Department of State Expenditure will be convening
a conference on expenditure budget reform in early
April 1996, involving several international authorities together
with local experts and stakeholders.
2.4.2 A medium-term expenditure framework
As indicated in the 1995 Budget Review, the Government
recognises the importance of a longer-term fiscal planning
framework alongside the annual budgetary process. A multiyear
fiscal framework is envisaged which will be updated on
an annual basis to provide all role-players with greater clarity
regarding public expenditure trends and priorities within a
macroeconomic context. Presenting budgets in the context
of a long-term expenditure framework will focus attention on
what programmes deliver and the overall balance between
expenditure allocations and will facilitate the selection of
cost-effective and growth oriented combinations of policies.
It is envisaged that a draft medium-term expenditure model
will be available to assist in the preparation of the 1997/98
Budget. The framework for this exercise has been designed
with a view to facilitating the alignment of departmental
programmes and budgets within the overall fiscal constraint
and the testing of policy options.
The Unit for Fiscal Analysis in the Department of Finance,
the Department of State Expenditure and the Central
Statistical Service have been collaborating on the initiative,
which has also involved extensive consultation with departments,
function committees and other analysts. The
medium-term framework will provide a basis for quantifying
and programming the fiscal requirements of the envisaged
Growth and Development Strategy. The Departments of